If you need money to make a big purchase or pay an unexpected bill, a personal loan can help you get the funds you need. You can use your loan to pay for a wide variety of household expenses, such as medical bills, home repairs, or even for a wedding.
Do you want to know how to apply for a personal loan? You are in the right place. Here below you will find a step-by-step guide on how to do just this.
Points to highlight
- A personal loan is an amount of money you borrow from a loan shark (such as a bank, credit union, or state-licensed lender) for your personal use. You receive all the money at once and pay it over time.
- You can use your loan to pay for a wide variety of household expenses, such as medical bills, repairs to your car or house, or even for a wedding.
- Before applying for a personal loan, it’s helpful to check your credit score, gather all the necessary documents, and find the right lender. Once you do these three things, applying for a personal loan is easy.
This is a summary of what we will explain:
- What is a personal loan and how does it work?
- How to apply for a personal loan?
-
- Review your credit report and check that there are no errors
- Calculate how much money you need in your loan
- know your rights
- Gather the documents
- Research potential lenders
- Get prequalified
- Officially apply for the personal loan
- Sign your loan agreement
- Get prequalified for a personal loan today. You don’t need a credit history
What is a personal loan and how does it work?
What is a personal loan? And how does a personal loan work? Before you apply for a personal loan, it helps to know how the process works. A personal loan is an amount of money that you borrow from a lender for your personal use. Banks, credit unions, and state-licensed loan sharks can offer you personal loans.
But remember that personal loans are not free.
After receiving your money, you have to pay it back over time. Every month you need to make your regular payments, which are fixed. These payments depend on the amount you borrowed and these loan terms:
- Deadline to pay it. The term to pay your loan is the time you have to pay off the balance in full. Payment terms for a personal loan are typically between 12 months and five years but can be longer.
- The APR rate. Lenders charge interest and fees on the money they lend you. This is the cost of borrowing money. Loan Sharks are required by law to disclose the annual percentage rate (APR) of loans so that borrowers (those who ask for the money) can compare various loan offers. The APR is made up of the interest and fees you pay on your loan. Is that how it works:
- Interest. it is a percentage of the total amount of the loan that you pay just for receiving the money.
- Rates. Certain fees are also included in the APR. These may include but are not limited to, loan origination and origination fees.
Fees and interest are added together to determine your APR. The higher the APR, the more you owe on the loan. The lower the APR, the less you owe.
If you need more money, you can apply for another personal loan or refinance your current loan.
How do I apply for a personal loan?
Now that you know how personal loans work, let’s see the eight steps necessary to apply.
Review your credit report and check that there are no errors
When you apply for a personal loan, loan sharks look at your credit score. A credit score is a three-digit number between 300 and 850 that is used to calculate how likely it is that you will make your payments on time. The higher your credit score, the better.
A high credit score shows that you generally make good credit decisions, such as paying past debts on time. Conversely, a low credit score tells loan sharks that you’ve had debt problems in the past, such as paying late. But it’s not just your credit history that affects your credit score; identity theft, too many new credit or loan applications, and a host of other things can lower your score.
If you have what financial institutions call a “poor or no credit record,” you may not even have a credit score. A thin file means that the credit bureaus do not have enough information about your credit history to create a score. But do not worry. Some personal loan sharks (like Opportun) take into account more than your credit score.
Your credit score is taken from your credit report. Since your credit score is so important, it’s a good idea to review that report before applying for a personal loan.
This website allows you to obtain a free credit report from each of the credit bureaus once every 12 month
